How should organisations address risks in their supply chain
Discussions around the new Modern Slavery Act requirements have largely focused on what exactly businesses should, or should not, include in their Slavery and Human Trafficking statement. Much of the conversations are around what should be included in the statement, who needs to comply and the timeline for responding to the Act. While the details of getting the statement right are important, Modern Slavery is a much broader issue that all organisations should investigate in their supply chains and address with utmost importance.
Transparency in supply chains is essential for any organisation that wants to tackle this complex issue and there are contradicting views around this topic. Some NGOs are championing transparency and think that in order to address this issue properly, the business community must enter an open dialogue about the challenges, pitfalls and solutions to mitigate the exploitation of people and the risks they are facing in their supply chains. As such, the more transparency and information a business can share, the better. On the other hand, there are advisors and legal firms who aim to minimise an organisation’s exposure to risk rather than identify and mitigate it. This approach could misguide organisations as to the heart of the issue and discourage them from sharing information that may invite public scrutiny.
So how should companies address the Modern Slavery Act and the potential risks associated with it? Based on Carbon Smart’s discussions with businesses since the Act was issued in October 2015, most organisations are keen to do the right thing and address modern slavery in their supply chains. There is a concern with regards to the risks that could come up as part of the process and how they should be disclosed publicly. This concern is justified. A recent survey led by the Ethical Trading Initiative and Ashridge University shows that 71% of businesses interviewed believed that it is likely that modern slavery is happening at some stage in their supply chains. Globalisation has created long and complex supply chains with many players involved, creating a challenging space for businesses to truly understand what is going on in their supply chains.
Identifying these risks, understanding what causes them and developing a mitigation plan are the real challenges the Modern Slavery Act opposes for organisations. Ergon Associates analysed over 200 statements that were published before 31 March 2016 – well before the deadline. The results revealed that 60% of the statements reviewed have not identified priorities based on their risk assessment, and a further 35% did not include any actions required to mitigate modern slavery risks. It may be that some businesses are reluctant to address risks in their supply chains out of fear of what might they find.
For many businesses, the risks are mostly unknown. Businesses’ supply chains are vast, some covering 10,000s suppliers who are not always willing to share information on their sourcing practices. Businesses need to find an approach which will enable them to focus their efforts on high risk areas and start to develop the knowledge and tools to tackle the issues. Once this has been developed, businesses can move onto expanding the scope and scale of their risk mitigation efforts.
Managing risks is an ongoing process that will develop over time. The statement itself acts as a snapshot of what a business has achieved over the course of the reporting year but is only an initial step which will enable organisations begin their journey to tackling modern slavery in their operations and supply chains. Going through the process is important for any organisation and will deliver a clear message to your stakeholders and civil society. Namely, a business needs to demonstrate that it understands its impact on society and has measures in place to stop modern slavery and human trafficking.
Carbon Smart’s goal is to help organisations become aware of the issue, learn whether modern slavery takes place in their supply chains, identify any risks and develop a mitigation plan. We will also help in preparing the statement required by the Act and provide you with useful tools that can be applied by your team members to ensure that modern slavery is not taking place in your organisation.